Executive Briefings

SPECIAL ISSUE: GLOBAL SUPPLY CHAIN PARTNERSHIPS

Home Depot: How Big Hardware Retailer Makes Direct Delivery Work

It seems like the unwieldiest distribution model of all. Most big retailers, afraid of clogging up their receiving docks, do everything in their power to minimize direct store deliveries. But Atlanta-based Home Depot takes a different approach.

Rather than route incoming product through a series of regional distribution centers, Home Depot, the "big-box" hardware and home products chain, prefers to receive direct from suppliers in Canada and the U.S. "The stores are big enough to be considered warehouses," says Greg Doyle, regional transportation manager in Toronto, Home Depot's
Canadian headquarters. "Each one carries up to 45,000 items."

The strategy saves money by eliminating an expensive network of DCs. But it also carries substantial risks in terms of customer service. A poorly managed supply chain can result in heavy stockouts. "What's on the shelf is the only product the store has," says John Fleming, senior corporate account executive with Reimer Express Lines Ltd., the Canadian subsidiary of Roadway Express Inc.

On closer examination, however, the risks aren't so great. Home Depot requires its truckers to provide the buffer that's missing from a direct store delivery (DSD) model. And in Canada, that carrier, especially for cross-border traffic, is Reimer.

Roadway is a longtime provider of less-than-truckload (LTL) service to Home Depot in the U.S. In March 1996, Home Depot hooked up with Reimer in Canada. According to Fleming, it had just purchased Aikenhead's, a Canadian hardware retailer. It planned to switch the Aikenhead's stores from a reliance on regional DCs and shipment consolidation to a DSD strategy. At the same time, it needed a single LTL carrier that could maintain consistent, reliable service to all 80 of its stores, in eight provinces of Canada. Home Depot had been using four or five carriers to move product from the U.S. to Canada.

A smooth border crossing topped the retailer's list of priorities. Too many truckers blame others when something goes wrong at the border, says Doyle. "I was looking for a partner who was willing to say, 'That's my responsibility.'"

Reimer was named the exclusive cross-border carrier for Home Depot Canada. It took on a task that involved the handling of goods from thousands of suppliers. For the largest vendors, that meant spotting trailers for loading at their own facilities. To control costs and make the best use of equipment, Reimer consolidates much of the U.S.-sourced product at a Roadway center in Tampa. Northbound loads might carry a combination of items for Home Depot and other Roadway/Reimer customers, Fleming says. Additional shipments come from the carrier's network of 400 terminals spread throughout the U.S.

Reimer maintains offices, staffed by its own employees, at every border crossing. Following the pickup of a shipment in the U.S., the carrier relays to the applicable border office, and to Home Depot's customs broker, all of the paperwork required by Canadian Customs. The broker works to get the shipment cleared in advance, informing Reimer of the actual clearance, or any glitches that might occur. The method of transmitting documents and messages began with fax and has since migrated to electronic data interchange (EDI), Fleming says.

Taking advantage of Canadian Customs' Pre-Arrival Release System (PARS), Reimer can move shipments over the border at the rate of one trailer every 90 seconds. The process is so smooth, Fleming says, that "it's no different than going from California to New York."

With Reimer acting as buffer, most Home Depot stores receive just one of the carrier's consolidated trailers each day, tied to specific appointments. Equipment size varies according to the day of the week, with the largest trailers showing up on Monday.

Adding to the complexity was Home Depot's insistence on switching to nighttime deliveries for all stores. "That was a huge turnaround," says Doyle. The switch began in October 2001 and was completed last March. Fleming says it wasn't especially onerous for Reimer, since the carrier already had round-the-clock operations at several of its facilities.

Reimer has helped Home Depot to shorten its order cycle time in Canada, reduce inventories, and minimize stockouts, says Fleming. The carrier now must cope with growth in the Home Depot network, with the retailer planning to double the size of its organization over the next several years.

As the network expands, Home Depot will begin moving away from DSD into consolidations and truckload deliveries. Reimer and other carriers will have to adjust their services accordingly. Says Doyle: "As we evolve our supply chain and move ahead more strategically, we're taking the carriers along with us for that ride."

It seems like the unwieldiest distribution model of all. Most big retailers, afraid of clogging up their receiving docks, do everything in their power to minimize direct store deliveries. But Atlanta-based Home Depot takes a different approach.

Rather than route incoming product through a series of regional distribution centers, Home Depot, the "big-box" hardware and home products chain, prefers to receive direct from suppliers in Canada and the U.S. "The stores are big enough to be considered warehouses," says Greg Doyle, regional transportation manager in Toronto, Home Depot's
Canadian headquarters. "Each one carries up to 45,000 items."

The strategy saves money by eliminating an expensive network of DCs. But it also carries substantial risks in terms of customer service. A poorly managed supply chain can result in heavy stockouts. "What's on the shelf is the only product the store has," says John Fleming, senior corporate account executive with Reimer Express Lines Ltd., the Canadian subsidiary of Roadway Express Inc.

On closer examination, however, the risks aren't so great. Home Depot requires its truckers to provide the buffer that's missing from a direct store delivery (DSD) model. And in Canada, that carrier, especially for cross-border traffic, is Reimer.

Roadway is a longtime provider of less-than-truckload (LTL) service to Home Depot in the U.S. In March 1996, Home Depot hooked up with Reimer in Canada. According to Fleming, it had just purchased Aikenhead's, a Canadian hardware retailer. It planned to switch the Aikenhead's stores from a reliance on regional DCs and shipment consolidation to a DSD strategy. At the same time, it needed a single LTL carrier that could maintain consistent, reliable service to all 80 of its stores, in eight provinces of Canada. Home Depot had been using four or five carriers to move product from the U.S. to Canada.

A smooth border crossing topped the retailer's list of priorities. Too many truckers blame others when something goes wrong at the border, says Doyle. "I was looking for a partner who was willing to say, 'That's my responsibility.'"

Reimer was named the exclusive cross-border carrier for Home Depot Canada. It took on a task that involved the handling of goods from thousands of suppliers. For the largest vendors, that meant spotting trailers for loading at their own facilities. To control costs and make the best use of equipment, Reimer consolidates much of the U.S.-sourced product at a Roadway center in Tampa. Northbound loads might carry a combination of items for Home Depot and other Roadway/Reimer customers, Fleming says. Additional shipments come from the carrier's network of 400 terminals spread throughout the U.S.

Reimer maintains offices, staffed by its own employees, at every border crossing. Following the pickup of a shipment in the U.S., the carrier relays to the applicable border office, and to Home Depot's customs broker, all of the paperwork required by Canadian Customs. The broker works to get the shipment cleared in advance, informing Reimer of the actual clearance, or any glitches that might occur. The method of transmitting documents and messages began with fax and has since migrated to electronic data interchange (EDI), Fleming says.

Taking advantage of Canadian Customs' Pre-Arrival Release System (PARS), Reimer can move shipments over the border at the rate of one trailer every 90 seconds. The process is so smooth, Fleming says, that "it's no different than going from California to New York."

With Reimer acting as buffer, most Home Depot stores receive just one of the carrier's consolidated trailers each day, tied to specific appointments. Equipment size varies according to the day of the week, with the largest trailers showing up on Monday.

Adding to the complexity was Home Depot's insistence on switching to nighttime deliveries for all stores. "That was a huge turnaround," says Doyle. The switch began in October 2001 and was completed last March. Fleming says it wasn't especially onerous for Reimer, since the carrier already had round-the-clock operations at several of its facilities.

Reimer has helped Home Depot to shorten its order cycle time in Canada, reduce inventories, and minimize stockouts, says Fleming. The carrier now must cope with growth in the Home Depot network, with the retailer planning to double the size of its organization over the next several years.

As the network expands, Home Depot will begin moving away from DSD into consolidations and truckload deliveries. Reimer and other carriers will have to adjust their services accordingly. Says Doyle: "As we evolve our supply chain and move ahead more strategically, we're taking the carriers along with us for that ride."